Live in Cincinnati, but work outside the city? You could lose tax credit

If you live in the city of Cincinnati but work in Mason, Blue Ash or any other city that imposes its own earnings tax, you have a $433 reason to pay attention to the Cincinnati budget debate.

Cincinnati City Manager Milton Dohoney proposed an end to the city’s reciprocity tax credit, which allows city residents to deduct the local taxes they pay elsewhere so they don’t have to pay combined income tax of more than 2.1 percent.

You’ll find the details on page 55 of the 793-page recommended budget proposal. The city estimates it would raise an extra $6.5 million from 15,000 city residents if the reciprocity credit were abolished. That’s an average of $433 per person.

“I hope it’s dead on arrival,” said Tom Green, an Oakley resident who is president of the Covington-based school supply wholesaler, John R. Green Co. “It would be an incentive for any resident who lives in the city but works outside the city to move out.”

Green is skeptical of the city’s estimate that only 15,000 residents would be impacted. He also said he wouldn’t likely relocate to another city solely based on the reciprocity change.

Council candidate Greg Landsman will criticize the idea as an anti-growth strategy in a news release tomorrow.

“We’re so close to growing again,” said Landsman, a Democrat who ran David Pepper’s 2005 campaign for mayor. “We’ve got to keep the momentum going. This is one of those things you’ve got to avoid doing.”

Council rejected the idea in 2010, but at least one member who voted against it then has yet to decide how she will vote this time.

“I’d like to see a little more data,” said Councilwoman Laure Quinlivan. “What kind of long-term effect does this have?”

Council is scheduled to vote on the budget Dec. 14.

The reciprocity idea has been overshadowed by Dohoney’s proposal to privatize city parking assets, a lease deal that could generate a one-time payment of more than $40 million. Since the city is shifting to a fiscal year in 2012, the December spending plan will cover only six months. So, Quinlivan expects the toughest choices to be made next spring.

“If we’re not going to outsource parking, lots of things will have to be cut,” she said.